After Dubai Ports World

KEEPING AMERICA a magnet for foreign investment should be an obvious national priority. Flows of foreign cash provide the U.S. economy with valuable capital and access to innovation, and they help mitigate the country's large trade deficit. U.S. policymakers aggressively hawk the benefits of a liberal investment climate to other countries.

But since the hysteria of a year ago over Dubai Ports World proposing to manage some U.S. seaports, the Committee on Foreign Investment in the United States (CFIUS), the federal panel responsible for ensuring that national security interests are not harmed by foreign acquisition of U.S. assets, seems to have slid in the opposite direction. A recent study by David Marchick, a former Clinton State Department official, concluded that the CFIUS approval process has become overly difficult and increasingly uncertain, making it riskier for non-Americans to invest in the country.

In 2006, Mr. Marchick found, voluntary filings of paperwork with the committee were up dramatically, indicating that foreign investors are increasingly worried about possible CFIUS scrutiny. The committee opted to conduct many more time-consuming second-stage investigations of proposed transactions than in years past, leading to more investors withdrawing during the approval process. And the Financial Times reported last week that CFIUS is threatening to impose enormous penalties on companies that violate even minor points in agreements brokered by the panel. These are bad signs.

Enter the House of Representatives, which unanimously passed a bill Wednesday designed to revamp the CFIUS approval process. By making the committee's procedures explicit in statute, the bill would usefully allow foreign investors to plan with some assurance. Especially given its provenance in the Dubai Ports World controversy, the bill, introduced by Rep. Carolyn B. Maloney (D-N.Y.) and shepherded through the House by Finance Committee Chairman Barney Frank (D-Mass.), represents sensible middle ground.

Now the action moves to the Senate, which last year passed a needlessly and harmfully stringent reform bill sponsored by Sen. Richard C. Shelby (R-Ala.). This year we hope that the Senate emulates the House in finding a better balance between security and economic freedom. Sen. Christopher J. Dodd (D-Conn.), the new chairman of the Banking, Housing and Urban Affairs Committee, has said that he will introduce CFIUS legislation. He should do so soon; Americans cannot let their fears continue to scare off valuable investment.